BetterLawNotes-5 (2)

CONTRACT LAW

This states that extrinsic evidence cannot be adduced to add to, vary, or contradict the written terms. See, for example, Jacobs v Batavia [1924] 1 Ch 287, 295 per PO Lawrence J.

Henderson v Arthur [1907] 1 KB 10

The terms of a lease provided that rent was payable quarterly in advance. The tenant argued that by a prior oral agreement, the landlord had agreed to take a bill by way of payment of each instalment of rent. Held: evidence of the oral agreement was inadmissible.

‘…to admit evidence of such an agreement as being so available would be to violate one of the first principles of the law of evidence; because, in my opinion, it would be to substitute the terms of an antecedent parol agreement for the terms of a subsequent formal contract under seal dealing with the same subject-matter. I do not see how, in this case, the covenant in the lease and the antecedent agreement can co-exist and the subsequent deed has the effect of wiping any previous agreement dealing with the same subject-matter … it is not merely a collateral agreement, but provides in another and contradictory manner for doing what was subsequently provided for by the lease.’

Collins MR.

In practice however the exclusionary effect of the parol evidence rule may be avoided in various ways. Examples include:

(i) Where the document does not contain the whole agreement

SS Ardennes (Cargo Owners) v SS Ardennes (Owners) [1951] 1 KB 55

The claimants shipped a cargo of oranges on board the defendants’ ship. The defendants had made an oral promise that the ship would sail straight to England. In fact the vessel stopped en route at Antwerp. When the claimants sued for breach of contract, the defendants argued that the bill of lading entitled them to proceed by any route to London, whether directly or indirectly. Lord Goddard C.J. held that the bill of lading was not the contract itself, so that evidence of the terms of the contract was admissible. That evidence showed that the statement that the vessel would sail directly to London was a term of the contract.

(ii) To demonstrate the agreement is invalid

Pym v Campbell (1856) 6 E & B 370

P had agreed in writing to purchase from C a share in an invention. When P sought to enforce the agreement, C argued that the agreement was subject to the approval of a third party and that such approval had not been forthcoming. Held: extrinsic evidence was admissible to show there was no enforceable agreement between the parties.

(iii) To incorporate implied terms

Hutton v Warren (1836) 1 M & W 466

The claimant had vacated the defendant’s farm on the expiry of the claimant’s tenancy. It was proved that, by the custom of the country, the tenant was entitled to a fair allowance for seeds and labour on the arable land. The tenancy agreement was silent on the point. Held: the tenant was entitled to the allowance as there was no indication in the agreement that the parties had intended to exclude the custom.

(iv) To prove custom

Smith v Wilson (1832) 3 B & Ad 728

A lease of a warren in Suffolk provided for the landlord to pay a certain sum to the tenant for every thousand rabbits which the lease required the tenant to leave on the premises. Extrinsic evidence was held to be admissible to show that in Suffolk 1,000 rabbits meant 1,200.

(vi) To demonstrate that the written document contains a latent ambiguity

Raffles v Wichelhaus (1864) 2 H & C 906; 159 ER 375

(vii) To establish the factual background

Prenn v Simmonds [1971] 1 WLR 1381

The case concerned the meaning of the term ‘profits’ contained in a written agreement made by the parties. The House of Lords held that extrinsic evidence as to the factual background known to the parties before or at the time of the contract was admissible in construing the document.

(viii) To demonstrate that the document does not accurately record the agreement of the parties

Joscelyne v Nissen [1970] 2 QB 86

J shared a house with his daughter N. Following the illness of his wife, J and N orally agreed that he would transfer his car-hire business to N and that in return she would pay him a weekly pension and also meet the gas, electricity, and coal bills relating to his part of the house. Subsequently a written agreement was drawn up and signed by J and N but, on its true construction, this agreement placed no obligation on N to pay the utility bills. When relations between J and N deteriorated, N stopped paying these bills. J sued. Held: the written agreement should be rectified so as to provide that N was liable for the utility bills.

(ix) Where a collateral contract exists

De Lassalle v Guildford [1901] 2 KB 215

A prospective tenant refused to enter into a tenancy agreement unless the landlord assured him that the drains were in good order. The landlord did so but the assurance was not reproduced in the written tenancy agreement which the tenant later signed. Held: the landlord was liable as the statement was incorporated into a collateral contract.

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